The latest underpayment scandal: Woolworths

On 30 October 2019, Woolworths voluntarily disclosed it had identified 5700 current staff, all paid an annual salary, who had been underpaid, with an unknown number of former employees also impacted. The final underpayment is, at this time, anticipated to be between $200-$300M.

While the FCB Group is not involved in this matter, from public reports it appears the underpayments occurred because the annual salaries paid by Woolworths to these employees over multiple years were lower than the minimum rates of pay and penalties payable for their work under the relevant Award.

This latest announcement follows other significant underpayment admissions by large employers including the Commonwealth Bank, the ABC and Qantas (among others).

The Fair Work Ombudsman has issued a strongly worded response to Woolworths, announcing their own investigation and mentioning Court action as a possible outcome. The FWO has also issued a general warning to Company Boards that enforceable undertakings and litigation will be considered for breaches of workplace laws.

This latest announcement comes at a time when the penalties for non-compliance have been significantly increased, a new sanction for “serious contraventions” has been introduced to the rule book, and there is talk in Canberra about the possibility of introducing criminal offences for cases of serious wage theft.

We are also mindful that, at the same time, the Fair Work Commission is gearing up to vary a significant number of Awards on 1 March 2020 to include new rules for setting annualised salary arrangements for Award covered employees, such as: a de facto “better off overall” test to ensure workers are paid above the award rates; a mandatory annual review of all annual salary arrangements; and obligations to keep time and attendance records for all award-covered employees on annualised pay arrangements to prove the employees are better off.

These are significant structural movements in the regulation of how Australian employers pay their staff – a critical issue that we will be exploring in more detail in our upcoming 2020 Workplace Review publication.  In the meantime, we are actively engaging with our clients to ensure they are meeting their pay obligations and becoming ready for the Award changes coming 1 March 2020.

If you would like to discuss any of the issues raised in the article, please contact our team of experts on 02 9922 5188 to learn more.